21st Dec 2022 14:42
(Alliance News) - Ferrexpo PLC is backed analysts at Liberum to recover from a very difficult period, as it brings one of its four pelletiser lines back online.
The iron ore pellet producer in Ukraine on Wednesday said that bringing one of its four pelletiser lines back online, alongside its stockpile material, would allow the company to meet the requirements of existing customer contracts.
It suspended operations in October, when a Russian missile strike damaged state-owned electrical infrastructure nearby, leaving Ferrexpo with a limited power supply.
Ferrexpo now has sufficient power to restart.
Liberum gives the London-listed company's shares a 'buy' rating with a target price of 250.00 pence per share. Liberum is a broker to Ferrexpo.
Shares in Ferrexpo were up 2.3% to 165.70p in London on Wednesday afternoon. The stock is down 45% over the past 12 months.
Ferrexpo said pellet production for 2022 is now expected to be between 5.9 million tonnes and 6.0 million tonnes, slightly below Liberum's estimate of 6.1 million tonnes. However it said sales should be around 1.75 million tonnes, above Liberum's own prior estimate of 1.6 million tonnes, improving near-term cashflow.
Expected 2022 production is down from 11.2 million tonnes in 2021.
Ferrexpo added that around 300,000 tonnes of pellets had been produced so far in the fourth quarter, "as a result of interruptions, and continued instability, within the state-owned electricity network that have been experienced in the fourth quarter of 2022".
Liberum said that, while Ferrexpo management doesn't have the visibility on a further ramp-up production, the investment bank itself forecasts an increase in the second quarter of next year.
"We had assumed that the disruption to power would continue until the second quarter of 2023, given the continued attacks by the Russians on the energy infrastructure ahead of a cold winter. However, given the limited stockpiles Russia has of long-range missiles, it would not make sense for these attacks to continue at the current pace for long," said Liberum analyst Ben Davis.
"The timeline to ramping fully back up will be contingent on power availability and stability, but also shipment routes. If Ferrexpo can regain port access it will be able to ship higher quality DR pellet to overseas customers. Otherwise it is dependent on continental Europe steel demand and production will stay at roughly 50% of capacity."
Ferrexpo said that, despite interruptions to production, shipments to customers during the fourth quarter continued at a run rate of around 250,000 tonnes per month.
By Greg Rosenvinge, Alliance News reporter
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